Are labor unions good for workers and the economy?

Leans yesSays it is contested

Is organized labor a boost or drag on workers and the economy? I'll pull current research on its effects.

Labor unions have both benefits and costs, and research finds the balance depends on perspective — worker, employer, or overall economy.

Benefits for Workers

The most consistent finding is that unions raise compensation and workplace standards for members:

•Higher wages: Unions raise the wages of their members by 10 to 15 percent. The Center for Economic and Policy Research finds unionization raises service sector workers' wages by over 10% – about $2.00 per hour, with the largest gains for low-paid workers.

•Better benefits and protections: Unions also improve fringe benefits and workplace procedures such as retirement plans, workplace grievance policies, and predictable scheduling. Studies have consistently shown that unionized workers earn higher wages and have more comprehensive benefits compared to their non-unionized counterparts.

•Reduced inequality and demographic effects: By encouraging egalitarian wage practices, unions serve to reduce race and gender wage gaps. Research notes unions provide transparency and other guardrails that help protect workers from employer discrimination, and because unions deliver larger wage gains for lower-wage jobs, they reduce income inequality.

•Spillover effects to non-members: Unionization also has spillover effects that extend well beyond union workers. Competition means workers at nonunionized firms see increased wages too. Heightened workplace safety norms can pull up whole industries. Through "threat effects" non-union employers may raise wages to deter unionization.

•Other worker well-being: Research shows benefits can extend beyond individual organizations, boosting sectors and even the economy by reducing staff turnover, providing or promoting training and encouraging innovation.

Effects on the Economy

Proponents and government reviews argue unions strengthen the broader economy:

•Contribute to growth and resilience: In addition to supporting the middle class, unions contribute to economic growth and resilience. They do so in part simply by reducing overall inequality, which can impede growth if disadvantaged people cannot access resources to acquire job skills or start businesses.

•Productivity: Unions can boost businesses’ productivity by improving working environments and by giving experienced workers more of an input into decisions that design better and more cost-effective workplace procedures. A global survey of more than 300 studies concluded unions do not, overall, reduce productivity, though it varies according to specific circumstances.

•Reduced inequality as economic benefit: Unionisation does make businesses less profitable for the owners. But importantly, it also reduces income inequality, which is seen as correcting market failures and stimulating consumer demand.

Criticisms and Trade-offs

Critics point to economic costs:

•Increased labor costs and reduced flexibility: Labor unions are often criticized for driving up labor costs, which can make it more difficult for businesses to compete in a globalized economy and for reduced flexibility: collective bargaining agreements can limit the ability of employers to adjust to changing economic conditions.

•Higher prices and competitiveness: When labor unions negotiate higher wages and benefits for workers, companies may pass these costs onto consumers in the form of higher prices for goods and services.

•Jobs and investment: If labor costs rise, Factories leave to find cheaper labor. Critics argue unions often advocate for higher wages and benefits at the potential cost of job creation within the economy, as companies may respond by hiring fewer employees or automating tasks. Some research argues widespread unionization can lead to higher wages, fewer jobs, less investment and higher prices for everyone else.

•Other concerns: Reduced employment, Higher costs, Conflicts, and potential for corruption and bureaucracy, and inflexibility and resistance to change are also frequently cited.

Bottom Line

•For workers: Almost all empirical evidence finds union members earn more, have better access to health insurance, pensions, paid leave, and more voice/predictability at work, with the biggest proportional gains for low-wage and Black and Hispanic workers. Non-union workers also often benefit indirectly.

•For the economy: Unions tend to reduce income inequality, raise middle-class incomes and spending power, lower turnover, and do not on average reduce productivity, but they do reduce profits for owners and can raise costs, reduce flexibility, and potentially reduce employment or investment in highly unionized firms or industries.

Whether that trade-off is "good" depends on values and policy goals: prioritizing higher labor standards, equity, and worker voice versus prioritizing low labor costs, maximum managerial flexibility, and short-term profitability.

Citations (1)

1treasury.govGovernment
FACT SHEET: Treasury Department Releases First-Of-Its-Kind Report on Benefits of Unions to the U.S. Economy
Backs: “Benefits for Workers. The most consistent finding is that unions raise compensation and workplace standards for members:”
evidence, official document, points to yes. Claim: Unions raise compensation and workplace standards for members, including higher wages and better benefits and protections.